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Contingency Fees

Unless you’ve been living in a bomb shelter over the past few years, you’ve seen commercials on television (or heard them on the radio) where they say, with vim and vigor, “You don’t pay unless we win.” Like they’re the only one’s in the Province of Ontario who do that.

Firstly, let’s be clear – they aren’t. Virtually every personal injury law firm in Ontario works on the basis of contingency agreements. That’s what they’re called. The concept of a “contingency” fee is that plaintiffs don’t lose out on the opportunity to bring an action against someone who’s hurt them because they can’t afford the legal fees. We all know that legal fees can be daunting. To deny someone access to justice because they can’t afford a lawyer runs contrary to most lawyers’ sense of reasonableness and fairness. So, with a contingency agreement, lawyers take the case on in the hopes that a settlement can be reached, after which they get paid. Sounds good right?

But here’s the thing. Most civil litigation cases can take upwards of 3 to 4 years to go from start (the day of the accident) to finish (judgement or settlement). Why so long? Well, first of all clients have to stabilize. After an injury there is an initial healing period. Sometimes things get better. Sometimes they don’t. Sometimes injuries don’t show up until well after the date of the accident. Sometimes new injuries or conditions develop because of the accident (arthritis, PTSD, joint pain) or because the body has been compromised and now moves in a different way to cope with the injury. Sometimes it is just unclear how long it will take to heal, or to what point. Until there is a stable condition, it is impossible to figure out how much a particular case is worth.

Then there’s the evidence. It’s not enough to have evidence of the accident that happened showing how it happened and who’s at fault. Clearly, insurance companies tend NOT to take our clients at their word that they are in pain, can’t walk, need a wheelchair etc. Doctors, sometimes a number of them, have to provide medical records to back up what the client is saying and show that there are clinical reasons for the pain and suffering AND show that it is linked to the accident. And here’s the thing about that … doctors don’t get paid by OHIP for doing examinations relating to litigation. We, your lawyers, have to pay them for their work.

Depending on the doctor, a report can easily run from $500 to $10,000.00. Often other experts have to become involved including occupational therapists, accountants, actuaries, physiotherapists, chiropractors, and so on. Everyone gets paid for their work, and their work is essential to that body of evidence needed to prove damages.

While we try to get the money back from insurance companies before sending the reports out, many insurers are now refusing to pay for them, claiming that it’s the Plaintiff’s responsibility to prove injury and damages and therefore the cost is the Plaintiff’s as well. The bottom line is, therefore, that the outlay is also on us until we win or settle.

Years ago, someone told me that the army moves at the pace of “hurry up and wait”. It seems like the court system has largely followed suit. While we often wait to start an action, even after one has commenced the process can take an unbearably long time. There are a great many steps that are needed before an action is settled. And a vast majority of them settle because of the work done in getting them ready for trial.

So, why is this important to you? While we work on your case, and others, we are laying out money and also waiting, and waiting, and waiting, for the settlement to happen. Meanwhile, the law firm’s rent, staff, insurance, utilities, computers, licenses and suppliers all have to be paid. While you wait, we wait. While you wait, our wallets get thinner and thinner and thinner.

While almost every personal injury firm uses contingency fees, not all firms are created equal. We encourage you to ask lots of questions before retaining your lawyer. For example, we have seen some changes in the market where some law firms advertise their services, but in reality the number you call ultimately just winds up referring you to somebody else altogether! We have received comments/complaints from people telling us that when they called the number they did so because they thought they were getting the lawyer in the commercial. It turned out they were getting referred to a completely different lawyer/firm down the street. Why, you may ask, would lawyers do that? What happens is the firm, described in the advertisement, send the client to another lawyer who does the work and then pays the referring lawyer a percentage of fees billed to the client. More disconcerting is, we have seen cases where that fee has been added to the bill as a disbursement so the lawyer who did the work isn’t out of pocket. You, however, are.

The referral fee is essentially getting paid for doing … nothing. Great work if you can get it, but that’s certainly unfair to clients who think they’re buying steak, are paying for steak and end up with a chicken wing. Sure, it’s food, but not what you ordered.

Then there are other firms who have created hidden fees (like the little referral fee that has been added to bills as discussed above). You thought you were going to settle and have to give 25% of that settlement to your lawyer. Well that seems reasonable, and is what you signed up for in the contingency retainer agreement that you signed. But, when you get the cheque from your $500,000.00 settlement there’s only $150,000.00. Where the heck’s the rest? It happens. And it’s made headlines.

The Law Society of Upper Canada (now the Law Society of Ontario), has weighed in and is creating rules and regulations for what should really be common sense. But, as noted above, not all firms are created equal.

At LMS we go to great pains to make sure you understand what you’re getting and what it’s going to cost you. At our firm, we generally charge a fee of 33%. On top of that is HST (sorry – we don’t want to be tax collectors any more than you want to pay it) and the disbursements that we pay out (those pesky medical reports or other expert reports that are needed to make your case).

We make the calculation clear and understandable. You know exactly where all the money is going and what it is for. No hidden charges, no fees on fees, no double billing or double collection. And you will ALWAYS get more than we do from the settlement.

Moral of the story – buyer beware. Be careful who you hire. Always ask questions. Don’t assume anything.